# Telecom Plus Plc delivers another year of record profits and record returns to shareholders

- Link: https://www.directorstalkinterviews.com/telecom-plus-plc-delivers-another-year-of-record-profits-and-record-returns-to-shareholders/4121160668
- Published: 2024-06-18T08:26:56+01:00
- Author: Amilia Stone

**Telecom Plus PLC** (LON:TEP) (trading as Utility Warehouse and UW), the UK’s only
supplier of bundled household utility services, has issued its final results for
the year ended 31 March 2024.

**Financial Highlights**

●    Revenues of £2,039.1 million (2023: £2,475.2m)

●    Gross profit up 16.0% to £355.2 million (2023: £306.2m)

●    Adjusted pre-tax profit up 21.5% to £116.9 million, slightly above market expectations(
2023: £96.2m)

●    Adjusted EPS up 9.9% to 109.0p (2023: 99.2p)

●    Statutory pre-tax profit up 17.6% to £100.5 million (2023: £85.5m)

●    Statutory EPS up 3.8% to 89.9p (2023: 86.6p)

●    Net debt to adjusted EBITDA ratio at 0.9x

●    Full year dividend up 3p to 83p (2023: 80p) per share

**Operational Highlights**

●    The business continues to perform strongly against the backdrop of a normalised
energy market, passing the 1 million customer milestone in Q4

●    Organic customer growth of 14.1%, taking our total base to 1,011,489 (2023:
886,579)

●    Service numbers increased by 328,949 to 3,127,097 (2023: 2,798,148)

●    Insurance policies up 38% to 139,109 (2023: 100,590)

●    Ranked “Best Value for Money” and “”Most Likely to be Recommended” in Uswitch
2023 Energy Awards; rated “Excellent” on Trustpilot

●    Increase in Partner numbers to 68,251 (2023: 59,842) reflecting ongoing strong
demand for our income opportunity as cost of living pressures continue

**Outlook**

●    With our recent strong rate of customer growth continuing into FY25, we are
confident of delivering organic net customer growth between 12-14% in FY25

●    Adjusted pre-tax profit for FY25 is expected to be between £124m-£128m

●    Ongoing favourable environment for recruitment of new Partners, supported by
both short and long-term drivers

●    Recently strengthened multiservice customer proposition and continuing rational
marketplace underpin our confidence in doubling the business to two million customers
over the medium term

> **Stuart Burnett, Telecom Plus** **Co-CEO, said:**
> _“We are delighted to have delivered another year of record customer numbers, 
> record profits and record returns to shareholders – all through helping households
> to stop wasting time and money.  Our unique multiservice model means we can continue
> to provide market-leading savings and sustainably outcompete within each of our
> core markets. At the same time, the additional income opportunity we provide to
> Partners for recommending UW to their friends and family has never been more in
> demand. _
> _With the business in such good health, and having passed through the 1 million
> customer milestone, our current rate of growth places us firmly on track to double
> the size of the business to two million customers over the medium term, with a
> commensurate increase in profitability and shareholder returns.”  _

There will be a virtual meeting for analysts today at 9.00am, accessible via https://
brrmedia.news/TEP_FY24

**Chairman’s Statement**

I am pleased to report another exceptional performance during FY24 with customer
and service numbers continuing to show strong organic growth, and with record profits
and dividends. 

Adjusted pre-tax profits increased by 21.5% to £116.9m (2023: £96.2m), slightly 
above market expectations, reflecting the continuing double-digit growth in our 
customer and service numbers, and a modest tailwind from higher energy prices in
Q1 (compared with the remainder of FY24). 

The Ofgem energy price cap during FY24 averaged £2,140 (2023: £3,100). This significant
reduction led to a fall in overall revenues for the business to £2,039.1m (2023:
£2,475.2m) notwithstanding a significant increase in service numbers and higher 
revenues from non-energy services. These factors were also responsible for our higher
gross profit margin, which at 17.4% (2023: 12.4%) is returning towards historically
normal levels, and the 16.0% increase in our gross profit to £355.2m (2023: £306.2m).
Adjusted earnings per share for the year rose by 9.9% to 109.0p (2023: 99.2p). Statutory
pre-tax profits rose by 17.6% to £100.5m (2023: £85.5m), and statutory EPS rose 
by 3.8% to 89.9p (2023: 86.6p).

Our strong organic growth continued during the year, with customer numbers increasing
by 14.1% to 1,011,489 (2023: 886,579) and service numbers rising by 328,949 to 3,127,097(
2023: 2,798,148).

Families across the UK faced strong inflationary pressures throughout the year, 
and we remain proud of the role we played in helping both customers and Partners
navigate the challenges this created. Our unique business model shares the benefits
we derive as an integrated multiservice supplier with our customers (by giving them
sustainable long-term savings on their essential household services), whilst our
Partner opportunity offers hard-working people, from all walks of life, the ability
to earn an additional long-term income (which helps offset their rising cost of 
living whilst building financial freedom). As a result we are seeing ongoing strong
demand in both these areas, with our total Partner numbers increasing by 14.1% to
68,251.

I am very proud of the commitment and achievements of our employees without which
this record Company performance could not have been achieved. Amongst other accolades,
we were awarded “Best Value for Money” and “Most likely to be Recommended” by Uswitch
in their 2023 Energy Awards, came out top in the latest Which? league table of Energy
Suppliers, were rated 5 stars for customer service by Uswitch in their 2024 Broadband
Rankings, and achieved an “Excellent” rating on Trustpilot. This positive recognition
reflects the outstanding customer service delivered by our colleagues, as well as
the great value for money of our customer offering and the dedication of our Partners.

**[Sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)**

Our people and the communities we serve are at the heart of our strategy. As a company,
we are culturally focussed on our sustainability – not just in our approach to building
long-term relationships with our customers and Partners and supporting our employees,
but also in ensuring that we are doing business responsibly. This includes considering
our wider impact on the environment around us and supporting the UK’s transition
to net zero.

I am pleased with the further progress we have made this year towards improving 
our sustainability, including leveraging our updated E.ON contract, which enables
UW to develop products that will better serve our customers as the UK moves towards
net zero.

On our diversity and inclusion agenda, not only have we exceeded our targets for
management roles held by women and employees from ethnically diverse backgrounds,
we have also developed and launched our UW Belonging groups, with six such groups
created during FY24. We also conducted a Diversity & Inclusion audit, the findings
of which will help us shape the future of this agenda at UW, ensuring we create 
an environment where everyone feels they belong and can develop to their full potential.

As families across the UK continue to face ongoing cost of living challenges, we
are proud of the role we play in helping our customers and Partners navigate these
sustainably, through a combination of savings on their household services (for customers)
and an additional income to help offset the rising cost of living (for Partners).
I am delighted that we have been able to quantify the positive socio-economic impact
of the UW Partner opportunity, with 86% of the Partners who responded to our survey
saying that being able to earn flexibly through UW had improved their quality of
life.
Looking ahead, our FY25 ESG objectives demonstrate the Company’s continued
commitment to improving its sustainability and I look forward to delivering further
progress over the year ahead. Further detail of the Company’s sustainability agenda
and ongoing progress is set out in our ESG and Sustainability Reports.

**Corporate Governance**

The UK Corporate Governance Code (the “Code”) encourages the Chairman to report 
personally on how the principles in the Code relating to the role and effectiveness
of the Board have been applied.

As a board we are responsible to the Company’s shareholders for delivering sustainable
shareholder value over the long term through effective management and good governance.
A key role of mine, as Non-Executive Chairman, is to provide strong leadership to
enable the Board to operate effectively.

We believe that open and rigorous debate around key strategic issues, risks, and
opportunities faced by the Company is important in achieving our objectives and 
the Company is fortunate to have non-executive directors with diverse and extensive
business experience who actively contribute to these discussions.

Further detail of the Company’s governance processes and compliance with the Code
is set out in the Corporate Governance Statement in the Annual Report.

**Dividend and Capital Allocation**

The Company continues to deliver strong underlying cash generation, notwithstanding
our ongoing double-digit organic customer growth.

We are proposing a final dividend of 47p (2023: 46p), bringing the total for the
year to 83p (2023: 80p). This will be paid on 25 August 2024 to shareholders on 
the register at the close of business on 2 August 2024 subject to approval by shareholders
at the Company’s AGM which will be held on 13 August 2024. The Company also completed
a share buyback of £10.2 million during the year, bringing the total return to shareholders
for FY24 to 87.1% of adjusted net income.

The Board adopts a disciplined approach to the allocation of capital, with the overriding
objective being to enhance long-term shareholder value, whilst maintaining an appropriate
level of gearing; this means retaining sufficient resources within the business 
to ensure that our organic growth is not constrained by lack of capital. We intend
to continue following a progressive distribution policy, returning 80%-90% of adjusted
net income to shareholders over the medium term, with the dividend growing in line
with inflation, and with the balance being allocated to buying back shares.

**Board Changes**

As previously announced last autumn, Andrew Lindsay is stepping down as Co-CEO and
from the Board after 16 years with the company. The current Co-CEO structure that
has been in place for the past two years provides a clear succession path, and Stuart
Burnett will assume overall responsibility for the business as sole CEO from our
forthcoming AGM in August. Andrew will remain with the business on a part-time basis
over the medium term, with a focus on supporting and further growing our Partner
community.

We are delighted to welcome Bindi Karia as a new independent non-executive director
to the Board. Ms Karia will join the Board immediately following the AGM.  We expect
her extensive experience, particularly in technology and innovation (where she has
held senior board, investment, and advisory roles across the technology sector in
Europe), to be of considerable value over the coming years.

**Outlook**

_Sustainable Growth_

As the only fully-integrated supplier in the UK spanning four essential household
markets (energy, broadband, mobile and insurance), our one-stop-shop proposition
delivers long-term savings funded by the inherent efficiency of our bundled multiservice
proposition, with significant and growing appeal. This sustainable cost advantage
sets us apart from our competitors, each of whom are focussed on individual market
segments; and with 97 out of every 100 UK households taking their essential home
services from these other suppliers, our organic growth opportunity has barely been
tapped. 

Since autumn 2021, over two and a half years ago, we have grown our customer numbers
at an annualised compound rate of over 18%, spanning a period during which energy
commodity prices increased steeply and then fell sharply, before stabilising at 
or around current levels. During the period of steeply rising energy prices, our
annualised customer growth rate was in excess of 20% (albeit on a smaller opening
customer base), whilst during the periods of both falling and now broadly stable
prices our annualised growth rate has been consistently around 14%. That we have
been able to deliver such strong double-digit growth during a rising, falling and
stable environment for energy prices gives us considerable confidence in our ability
to continue doing so in future.

_Regulatory Environment_

We fully endorse the more responsible regulatory environment for retail energy suppliers
now in force, an outcome which we spent many years lobbying for. The combination
of new capital adequacy requirements being imposed upon suppliers and the low regulatory
EBIT margin allowed by Ofgem, make it extremely challenging for any standalone energy
supplier to sell below the level of the price cap and earn an acceptable return 
on capital. As a result, we are uniquely positioned to outcompete over the longer
term increasing our market share both sustainably and profitably.

Against that backdrop, and with energy prices having fallen significantly from their
peak, rational competition has returned. All the major energy suppliers are actively
seeking to acquire new customers, with a marked increase in advertising but, critically,
based upon sensible pricing strategies. In this competitive marketplace, it has 
been encouraging to see our recent growth rate continuing into the new financial
year, consistent with our guidance range set out below.

_Energy Prices_

The average energy price this year is expected to fall by around 20% during the 
current year compared with FY24 (from £2,140 to around £1,650); this creates a modest
headwind by reducing our average revenue per customer. However, the negative impact
on our profitability from these lower energy prices will be offset by improving 
our operating leverage and selectively increasing our non-energy pricing, whilst
maintaining a market-leading competitive position across all our services.

Looking forward, we retain significant levers to grow our EBITDA per customer over
time, including further multiservice pricing optimisation, higher service penetration,
and improved operating leverage.

_Guidance_

We remain focussed on doubling the size of the business to over two million customers,
with the following medium-term internal base case planning assumptions:

 * annual percentage customer growth is expected to remain within the 10-15% range,
   with 12-14% organic customer growth expected during FY25;    
 * adjusted pre-tax profits are expected to increase broadly in line with customer
   growth, with Adjusted PBT for FY25 expected to be within a range of £124m to 
   £128m; and
 * excess capital will be returned to shareholders through a combination of steadily
   increasing dividends and buying back shares.

Both our people and our technology are vital to delivering an exceptional UW experience
to our customers, and we will continue to invest in strengthening our teams at all
levels as we scale, whilst evolving and improving our systems. It has been exciting
to see our Partners recommending our strong and differentiated consumer proposition
to a record number of households, delivering significant and high quality organic
growth. With UK households facing continuing challenges and uncertainties over the
coming year, and with continuing uncertainty around the ability of households to
effectively fund a comfortable retirement, we anticipate that demand from new Partners
joining UW to earn a valuable and secure residual income stream will remain strong.

I would like to thank my boardroom colleagues for their support and all our staff
and Partners for their energy, drive and hard work through another exciting year
of growth, and the contribution they are making to the ongoing strong performance
of the business.

Having broken through the one million customer milestone during FY24, we are now
firmly on track to achieve our next milestone of two million customers over the 
medium term, and we look forward to making significant further progress towards 
this over the current year.

**Charles Wigoder**

Non-Executive Chairman, Telecom Plus

18 June 2024

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